Segment Information

3 Months Ended

Dec. 31, 2014

Segment Information

Segment Information

11.Segment Information

We operate principally in the contract drilling industry. Our contract drilling business includes the following reportable operating segments: U.S. Land, Offshore and International Land.  The contract drilling operations consist mainly of contracting Company-owned drilling equipment primarily to large oil and gas exploration companies.  To provide information about the different types of business activities in which we operate, we have included Offshore and International Land, along with our U.S. Land reportable operating segment, as separate reportable operating segments.  Additionally, each reportable operating segment is a strategic business unit that is managed separately.  Our primary international areas of operation include Colombia, Ecuador, Argentina, Tunisia, Bahrain, U.A.E. and other South American and Middle Eastern countries.  Other includes additional non-reportable operating segments.  Revenues included in Other consist primarily of rental income.  Consolidated revenues and expenses reflect the elimination of all material intercompany transactions.

We evaluate segment performance based on income or loss from continuing operations (segment operating income) before income taxes which includes:

revenues from external and internal customers

direct operating costs

depreciation and

allocated general and administrative costs

but excludes corporate costs for other depreciation, income from asset sales and other corporate income and expense.

General and administrative costs are allocated to the segments based primarily on specific identification and, to the extent that such identification is not practical, on other methods which we believe to be a reasonable reflection of the utilization of services provided.

Segment operating income for all segments is a non-GAAP financial measure of our performance, as it excludes certain general and administrative expenses, corporate depreciation, income from asset sales and other corporate income and expense.  We consider segment operating income to be an important supplemental measure of operating performance by presenting trends in our core businesses.  We use this measure to facilitate period-to-period comparisons in operating performance of our reportable segments in the aggregate by eliminating items that affect comparability between periods.  We believe that segment operating income is useful to investors because it provides a means to evaluate the operating performance of the segments on an ongoing basis using criteria that are used by our internal decision makers.  Additionally, it highlights operating trends and aids analytical comparisons.  However, segment operating income has limitations and should not be used as an alternative to operating income or loss, a performance measure determined in accordance with GAAP, as it excludes certain costs that may affect our operating performance in future periods.

Summarized financial information of our reportable segments for the three months ended December 31, 2014 and 2013 is shown in the following tables:

									Segment
	External		Inter-			Total			Operating
(in thousands)	Sales		Segment			Sales			Income (Loss)
December 31, 2014
Contract Drilling:
U.S. Land	$	890,047	$	—		$	890,047		$	318,122
Offshore	69,473		—			69,473			21,484
International Land	92,885		—			92,885			12,214
	1,052,405		—			1,052,405			351,820
Other	4,180		222			4,402			(1,899		)
	1,056,585		222			1,056,807			349,921
Eliminations	—		(222		)	(222		)	—
Total	$	1,056,585	$	—		$	1,056,585		$	349,921
									Segment
	External		Inter-			Total			Operating
(in thousands)	Sales		Segment			Sales			Income (Loss)
December 31, 2013
Contract Drilling:
U.S. Land	$	731,674	$	—		$	731,674		$	250,952
Offshore	59,054		—			59,054			18,498
International Land	95,341		—			95,341			12,751
	886,069		—			886,069			282,201
Other	3,083		220			3,303			(3,005		)
	889,152		220			889,372			279,196
Eliminations	—		(220		)	(220		)	—
Total	$	889,152	$	—		$	889,152		$	279,196

The following table reconciles segment operating income per the table above to income from continuing operations before income taxes as reported on the Consolidated Condensed Statements of Income.

	Three Months Ended
	December 31,
	2014			2013
	(in thousands)
Segment operating income	$	349,921		$	279,196
Income from asset sales	4,155			5,664
Corporate general and administrative costs and corporate depreciation	(22,257		)	(20,829		)
Operating income	331,819			264,031
Other income (expense):
Interest and dividend income	285			453
Interest expense	(561		)	(1,194		)
Gain on sale of investment securities	—			—
Other	314			(345		)
Total other income (expense)	38			(1,086		)
Income from continuing operations before income taxes	$	331,857		$	262,945

The following table presents total assets by reportable segment.

	December 31,		September 30,
	2014		2014
	(in thousands)
Total assets
U.S. Land	$	5,451,403	$	5,260,810
Offshore	138,539		137,101
International Land	650,872		589,968
Other	40,612		40,080
	6,281,426		6,027,959
Investments and corporate operations	512,696		686,696
Total assets from continued operations	6,794,122		6,714,655
Discontinued operations	7,397		7,206
	$	6,801,519	$	6,721,861

The following table presents revenues from external customers by country based on the location of service provided.

	Three Months Ended
	December 31,
	2014		2013
	(in thousands)
Operating revenues
United States	$	956,281	$	788,691
Colombia	23,451		26,730
Argentina	25,083		26,359
Ecuador	15,194		17,800
Other foreign	36,576		29,572
Total	$	1,056,585	$	889,152